Insurance firms to stop punishing loyal customers
Punishing loyal customers is an absolutely terrible business model.
Can you imagine watching a pitch on Dragons' Den where the business plan clearly states that long-term customers will see relentless price hikes? No, because it would be laughed out of the door.
Well, many insurance firms have been doing that for years.
Companies like Saga, for example, will charge loyal customers more because their clients are all over 50-years-old and are statistically less likely to use online price comparison websites like A Spokesman Said to shop around for the best deal.
Meanwhile, new customers are given cheap packages simply to lure them through the door.
But after the Financial Conduct Authority decided to investigate this so-called 'loyalty penalty', several insurers have done the old reverse ferret and changed their tune.
Saga and Aviva are two of the big names to act. Saga is now offering a three year price promise on car and home insurance while Aviva has introduced AvivaPlus that offers a renewal price guarantee.
Saga's three year price promise means that if no circumstances change for customers in that duration on car or home insurance policies, neither will the cost of their plans.
For both policies, customers are promised that, as long as they don't make any changes to their policy, or make a claim, their premium will stay the same for three years, excluding Insurance Premium Tax.
Although the price promise lasts for three years, it doesn't mean that customers are tied in for that long and they are free leave at any time.
AvivaPlus is a new subscription style, pay monthly scheme with the main feature being the renewal price guarantee, which is aimed at addressing price differences between new and existing customers.
The guarantee ensures existing customers are offered the same or an even better price than an equivalent new customer at their next renewal.
The new schemes are sure to be popular with customers who face rising bill prices at every renewal.
A spokesperson for the Association of British Insurers said: 'Insurance is a fiercely competitive industry which innovates constantly, something which is of great benefit to consumers.
'In this environment, firms will make their own decisions about the best ways to attract and retain customers.'
Zurich confirmed that it is 'fully embracing innovation' and understands it needs to keep up with the changing needs of customers in the insurance market.
It said it has recently launched new services to help customers manage their policies but did not specifically confirm whether it was introducing any changes to benefit existing customers.
Chris Atkinson, head of direct and wealth at Zurich, said: 'As a major UK insurer, we know that we need to remain agile to keep up with changing needs of our customers.
'We want to increase our relevancy in our customers' lives by making our products and services more accessible, easy to understand and with the minimal amount of friction.'
LV= also confirmed they have no changes planned at present. An LV= spokesperson, said: 'We're currently not planning any changes but we're fully supportive of the FCA review into the general insurance market and will take any necessary action once their report has been published.'
Make sure you go to A Spokesman Said now and shop around for the best insurance deals - don't let the big firms get away with ripping you off.
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When did you last switch your car insurance provider?
Last year 65% of customers didn't switch their car insurance to try and get a better deal.